What happened
Shares of Myriad Genetics (MYGN +0.58%) fell over 42% today after the company reported fiscal first-quarter 2020 operating results. The latest numbers make it clear that the genetic testing pioneer continues to struggle, which is all the more surprising considering peers and competitors are making double-digit growth look ridiculously easy.
Not so for Myriad Genetics. A change in billing codes commonly used for its hereditary cancer tests, originally expected to have an immaterial impact on the business in fiscal 2020, is now expected to lead to a significant reduction in revenue and earnings. Management told investors to expect improvements as the company transitions into fiscal 2021, but that's not what weary shareholders want to hear after just one quarter of operations in the current fiscal year.
As of 1:12 p.m. EST on Tuesday, the stock had settled to a 41.5% loss.
Image source: Getty Images.
So what
Citing the deletion of a commonly used billing code, Myriad Genetics reduced fiscal full-year 2020 revenue guidance from its original estimate of $870 million to a new expectation of just $805 million. Wall Street analysts on average were once expecting $922 million, which dropped to $872 million after the company issued its original guidance. It appears analysts will need to significantly alter expectations yet again.
That lost revenue will severely hurt the profitability of the business, as summarized by the table below:
|
Metric, Fiscal Full-Year 2020 |
Myriad Genetics Original Guidance |
Myriad Genetics New Guidance |
Wall Street Original Estimate |
Wall Street Latest Estimate |
|---|---|---|---|---|
|
Total revenue |
$865 million to $875 million |
$800 million to $810 million |
$922 million |
$872 million |
|
Adjusted earnings per share |
$1.80 to $1.90 |
$1.00 to $1.10 |
$1.92 |
$1.82 |
Data source: Myriad, Yahoo! Finance.
For additional context, Myriad now expects to generate less revenue and adjusted EPS in the current fiscal year than the previous year. In fiscal 2019, the business generated $851 million in sales and $1.42 in adjusted earnings.
Now what
Disappointing news is becoming normal for Myriad Genetics. It has failed to generate much momentum in recent years or to adequately replace shrinking revenue from its legacy hereditary cancer portfolio with new genetic tests in other areas, such as prenatal or for prostate cancer. This quarterly report is just the latest example of how the pioneering company has lost its way. Judging from today's stock move, investors may have finally run out of patience.
